Rising unemployment and migration: Bhutan labour market in crisis

95% of private sector firms have 5 or less people and they do not grow over time

Profiles of available or future vacancies in the private sector do not match those of the current job-seekers in Bhutan

The World Bank Report 2024 on the labour market in Bhutan reveals that there are significant challenges faced by workers in the country. The report highlighted various issues including weak employment quality outside of the public sector, rising unemployment among urban workers, and a growing number of Bhutanese migrating abroad.

The assessment found that employment quality in nonagricultural sectors in urban centers remains poor, with overwork affecting 63 percent of the workforce. This overwork is particularly prevalent in sectors, such as construction, wholesale and retail trade, transportation, and accommodation and food services, where self-employed and family workers dominate.

Furthermore, the report noted that a significant proportion of workers, particularly in urban areas, do not have written contracts from their employers. This lack of job security is a concern, with one out of three salaried employees in Bhutan lacking a written contract.

In response to the limited attractive options for the fast-growing cohorts of educated workers outside of the public sector, the rise of unemployment in urban areas that began in 2019 continued in 2022.

Although there is no evidence that the unemployed have unrealistic wage expectations, the majority prefer public sector jobs over private sector ones.

The private sector in Bhutan is also facing challenges, including a shortage of skilled workers and difficulties in filling vacancies in low and semi-skilled positions. The report highlighted that most firms in the private sector are small enterprises with low productivity, contributing to the high unemployment rate among skilled professionals.

The report pointed out that women in Bhutan face barriers to meaningful employment, including limited access to private sector jobs, and a higher risk of being not in education, employment, or training (NEET). Women tend to work in low-productivity sectors, such as agriculture, manufacturing, and services, or as self-employed or family workers.

In addition, a large number of Bhutanese workers have migrated since 2022 or have plans to migrate. The average number of those migrating increased significantly to more than 5,000 a month in early 2023, compared with less than 500, on average, one month prior to the pandemic.

One out of 10 NEET individuals plans to migrate abroad.

Further, the report revealed that over 95 percent of registered firms in the private sector have five employees or fewer, and they do not grow over time. Close to 75 percent of firms with fewer than five employees have been operating for one to nine years.

Firms are also geographically concentrated 69 percent of them are in Thimphu, Gelephu, or Punakha and are not sufficiently diversified in terms of economic activity. 80 percent are in the wholesale and retail trade and accommodation and food services sectors.

These dominant economic sectors have, on average, low labor productivity.

Meanwhile, the private sector is undergoing labour shortages, despite rising unemployment. Labour shortages stem from two imbalances in the labour market.

First, the profiles of available or future vacancies in the private sector do not match those of the current job-seekers in Bhutan.

Second, a large number of low or semi-educated workers who could fill the vacancies are either outside the labour force, mostly women or are engaged in low-productivity livelihood activities as self-employed workers.

In addition, over 90 percent of firms noted that they have no links to public vocational or training institutions to help meet their demand for skilled workers with technical and certificate-level education.

Finally, private sector activity may be hampered by a competition policy that encourages the dominance of state-owned enterprises in key economic sectors.

Overall, the labour market in Bhutan is segmented along the lines of gender, location, and education, with men and high-skilled workers in urban areas dominating public sector employment, while female, low-skilled, and rural workers face limited options for upward mobility.

The findings of the report underscore the need for targeted interventions to address the challenges faced by workers in Bhutan, and to promote inclusive and sustainable growth in the country’s labour market.

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